If you’re not receiving Social Security benefits, you’ll need to sign up for Medicare three months before your 65th birthday
Medicare will likely become part of your life after you turn 65. In the United States today, most health plans pay secondary to Medicare.
So, if you’re currently covered by a retiree health plan, an individual policy, or a small employer group plan, you must enroll in Medicare when you turn 65.
The only people who are exempt from enrolling in Medicare at 65 are workers and spouses who are covered by an employer group plan that covers 20 or more employees. Their time will come later.
Medicare is a national health insurance program for people over 65 and people under 65 who are receiving Social Security disability benefits. Participation is essentially mandatory if you want to have health insurance in this country. When you turn 65, Medicare becomes the primary payer.
What Medicare covers
- Part A covers part of the cost of hospitalization.
- Part B covers part of the cost of doctor visits and other health care services.
- Part D covers part of the cost of prescription drugs and is offered through private insurers.
Medicare may or may not pay the full cost of Parts A and B. Any balance is your responsibility and you can utilize supplemental private insurance to pick up the part of the bill that remains after Medicare has paid its share.
Part D is different because you need to select a prescription drug plan offered in your area. A key part of enrolling in Medicare is shopping for prescription drug plans and finding one that offers the coverage you need for the drugs you take at a price you can afford.
How much Medicare costs
Medicare is not free. While you most likely won’t pay a premium for Part A, you will be responsible to pay a deductible before Medicare pays its share.
Part B is not free for anyone (except those who qualify for special assistance for being poor). Medicare charges a monthly premium that is deducted from your Social Security check or you will receive a bill from Medicare. High-income people will pay an extra amount on top of the base premium.
There is an annual deductible that you or your supplemental insurance must pay before Medicare pays its share. There is no limit to the out-of-pocket expenses you could pay under Medicare alone, so most people have supplemental insurance.
How to enroll in Medicare
If you’re not receiving Social Security benefits, then you will need to proactively sign up for Medicare three months before your 65th birthday. Call the Social Security Administration at 800-772-1213 or online at www.socialsecurity.gov. You can enroll in Part D (prescription plan) through a private insurer or Medicare. There may be a late-enrollment penalty if you do not enroll within the enrollment periods.
How to get supplemental insurance
Shop for your private plan well before your Medicare effective date so your supplemental insurance will start at the same time.
Supplemental insurance is also known as “Medigap” because it’s designed to cover the gaps that Medicare doesn’t pay such as deductibles, co-payments, and coinsurance amounts for Medicare-approved services.
Policies are standardized so that all policies identified by the letter A through N offer the same benefits. Plan F is the most popular and comprehensive because it provides the same benefits no matter which insurance company you buy it from.
Medicare Advantage plans are offered by private insurers. They are often called Plan C. Medicare Advantage plans provide extra services, such as vision care or wellness programs. If you have a Medicare Advantage Plan you may not apply for a Medigap policy.
What about long-term care?
Medicare doesn’t cover long-term care. Most long-term care in the United States is delivered by family members primarily because families cannot afford to pay for professional care, either at home or in a facility.
Private long-term care policies are available to cover this risk and are often purchased when you’re in your 50s.
Health insurance costs after retirement can be a major expense, so proper early planning is essential. Make sure you begin discussing the alternatives after your 64th birthday, so that you’re well prepared. Your financial advisor should be equipped to provide you with additional education and help you make informed decisions.
By Mark A. Chandik, President/Chief Investment Officer, FDP Wealth Management